Providing Multiple Units of a Public Good Using Individualized Price Auctions: Experimental Evidence

Pengfei Liu and Stephen K. Swallow

Journal of the Association of Environmental and Resource Economists, 2019, vol. 6, issue 1, 1 - 42

Abstract: We present experimental results on the provision of multiple units of a threshold public good using individualized price auctions (IPA). The IPA asks each individual to pay the same price for each unit provided. The individual’s price can be either one’s bid or one’s pivotal price on the marginal unit provided by the group. The public good is provided in a sequential manner leveraging the provision point mechanism. We also investigate two market clearing rules: the ascending-unit rule, where the auctioneer determines the provision outcome starting from the first unit, until no more units can be provided; and the descending-unit rule, where the auctioneer determines the provision outcome starting from the last available unit, and provides as many units as possible. Experimental results show that the IPA approaches can increase the realized social surplus compared to the traditional pay-your-bids approach by almost a third.

Date: 2019
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